OECD notes low taxes

Interesting OECD report out today:

29/03/2006 - Belgium, Germany and Hungary impose the highest taxes among OECD countries on the pay of a single person on average earnings, while Korea, Mexico and New Zealand take the least, according to the latest edition of the OECD’s annual publication Taxing Wages.

Remind me again why people whine about taxes here? Oh, wait, of course, ideological fiction strikes again. Yawn.

Comments

[Aj]

Nothing new to those people who prefer facts to rhetoric.

[Michael]

That's a nice bit of spin - The quote is about taxing in the hand wages of an average worker, not all workers and all taxes.

So it excludes Sales Taxes (NZ has one of the highest in the world because it's so comprehensive) plus other revenue gaining techniques like petrol levies, etc.

Low income workers have it worse here than most OECD countries - and WFF only applies to those with families.

[Aj]

Nothing new to those people who prefer facts to rhetoric.

[Aj]

Our GST is not high compared to other country [or state] sales taxes.
And OECD countries have a range of taxes on alcohol, petrol etc as well.

[Billy]

AJ, Jordan, just so I understand, your position is: 1. we have low taxes; and 2. low taxes are a good thing.

[STC]

I think their point is that the myth of NZ as a high-tax over-regulation business destination are not in keeping with the reality of other countries realities - ACT and National often rhetorically refer to other nations to try and get people to believe them on the tax and regulation issues.

If you want to argue that taxes are too high and there is too much regulation, you still can - but NZ does pretty well on both of these scales internationally; perhaps these two factors aren't the only cause of our economy not having kept pace over the last fifty years.

[Michael]

AJ - Our rate of GST is similar to most other countries (10-15% is normal) but what is different is that we levy it on almost everything. For instance, VAT in Britain is much less a burden than in NZ as it only on 'luxury items' - Plain biscuits are VAT free, but chocolate ones are not. Same with GST in Australia - an uncooked chicken from the supermarket is GST Free, a cooked one attracts GST. Your weekly GST bill is much higher in NZ than elsewhere.

[tim barclay]

We whine becuase taxes in NZ incomes are at such a low level while the Government is running such a huge surplus. Get it into your head that income taxes do NOT matter to epople on hjigh incomes. By high I mean over $150,00. But below that level income taxes cut into long term saving and consumption. Even this Government has people on over $100,000 collecting welfare top-ups. It would be far more efficient to just let them have the money in the first place.

[Mark]

I looked at the article and the rates being discussed don't marry up with the total tax take as a % of GDP.

It seems to me that they are basing the calculation soley on the tax rate from the average workers pay only which is only a portion of the total tax collected by the Labour government.

In fact the average is even lower than the tax rate IRD collects only salary and wage earners of up to $38,000 including the earning levy is 20.7 cents in the dollar (and I suspect the calculation does not include the levy either).

This means the Labour government only cares about running a low wage economy as proven by the falling productivity figures since 2000 and commented by Jordan on his blog that productivity increases is not a big issue for this government.

Labour's theory is keep them dependent on welfare and they will have to vote for you, not let's actually grow the economy and make everyone better off.

I would be interested if somebody could provide a link to the report to see what they used in the calculations.

However, the most important points missed from the article is that tax burden on the middle class is increasing in NZ and that in the rest of the OECD is moving to a lower and flatter tax rates.

In this country grumpy Cullen and Labour has increased the rate of taxes, and hasn't yet reduce any level of taxes.

This is why more and more people are heading overseas and not returning.

Why work in NZ when you can earn double in OZ.

[James]

No amount of fiddling with figures can hide the fact that taxes are too high in New Zealand.

Everyone knows taxes are too high, here. It's a basic fact.

[Juha]

"Income tax plus employee and employer contributions less cash benefits as a % of labour costs"

So for single people in NZ, without children, earning the average wage, the percentage is 20.5% of labour costs.

That's the "tax wedge", not the actual taxation that wage earners are subject to.

It doesn't say anything either about whether or not the average salary in any of the countries is enough to get by on.

[Aj]

Micheal, I think you are quite wrong in saying that GST/VAT tax ratres 0f 10-15% are 'normal'. I think you will find that many countries have rates 15-20% and some even higher.
UK for example 17.5%
The claim that the average kiwi's GST bill is "much higher than elsewhere" simply doesn't hold up. There are only a small number of exemptions in most countries and they don't make up a large enough % of purchases to make a significant difference to the % tax take on your average spend.
Been shopping in the UK, Aussie lately ??

[M'lud]

Jordan, you ought to know better than to throw your arms around this claim without checking its assumptions, qualifications etc. I bet you'd spin this differently if you were in Oppo right now.

And the "study" would look even better without the 39% envy tax bracket.

[Aj]

Australian tax rates, including their 'envy' rates :-)

$0 – $6,000 Nil
$6,001 – $21,600 15c for each $1 over $6,000
$21,601 – $63,000 $2,340 plus 30c for each $1 over $21,600
$63,001 – $95,000 $14,760 plus 42c for each $1 over $63,000
Over $95,000 $28,200 plus 47c for each $1 over $95,000

These rates do not include the 1.5% medicare levy

Capital gains tax - is not a separate tax, but a component of income tax. This means that capital gains are taxed at the rate that applies as a result of the level of your other taxable income.

[David]

In some countries in Africa they still circumcise woman. just because other countries do things, its no justification for us too. Your arguement is specious.

[Whaleoil]

Except AJ you have forgotten all the deductions you can remove pre-tax before they calculate your income like the payments on your car, LAFHA if you are from New Zealand or out of state, private medical insurance and many others.

To look simply at tax rates confuses the issue.

Someone on over $100k in Australia can, with effective tax management and utilising all of the avaiable deductions pre-tax, reduce their effective tax rate to around 21%.

And before you say bullshit, I know because I did it.

[Whaleoil]

oh and also you actually don't ever have to pay capital gains tax if you roll the gain over into another property and so never actually take it....except you can take it by increasing your borrowing which isn't income and therfore isn't taxed.

[Michael]

AJ - You're not correct. VAT doesn't apply to most supermarket items except products deemed to be 'luxuries'. So you're fruit, vege, plain foods, household cleaners etc are not charged. I don't think it is charged on Utilities, either. So while you pay 17% on some items your biggest regular items are free of VAT.

Last night I found a bill from a stay in Poland last year. The VAT on different items were 0%, 7% and 22%. The 7% was on the room charge, the 22% on the restaurant charge and 0% on the stuff we had from the minibar.

[Mark]

Can sombody remind me why my tax dollars go to families where 'Truants caught in police bid to cut crime'.

See stuff - http://www.stuff.co.nz/stuff/0,2106,3621781a7694,00.html

Give them my money with no responsibility and what do you get?

[Mark]

Also from the report

The OECD did find New Zealand, with a figure around 42 per cent, had the second highest level of personal income tax as a share of total tax revenue among the 30 member countries.

[tim barclay]

I was listening to BBC on SKY (yes it is running again) and the international community is shorting NZ, South Africa, Hugary and Poland and Iceland. So that is where the Labour Government is taking NZ. There is nothing good about the falling dollar and it says the international community has lost faith in NZ and there is nothing at all that has been done by the Labour Government to remove that perception except the Guardian editorial. And there is nothing to be gained by criticising the US which is the message Tony Blair has sent to the NZ Labour Party.

[Aj]

Michael, I expect you are right regarding many supermarket type items in the UK. The 17.5% rate will still make the VAT portion of an average type of household expenditure quite large. I'd like to see authorative studies before conceding defeat.
If you look at VAT/GST rates from around the world there is wide variation in rates and exemptions. Poland is not untypical.

Whaleoil, I would not say bullshit. I am alays learning, you saying that ' you can remove pre-tax before they calculate your income like the payments on your car' ? For Mr average? or do you mean provided they are 100% business purposes. Please don't muddy the water.

The rest of your post, so what? tax minimisation is nothing new in this country either.
So simple tax rate comparisons confuse the issue? Certainly nothing confusing about comparing 'envy' rates.
One thing is for sure. Even tax experts find it difficult to compare the overall personal taxation levels between Aussie and here, although the general consensus is that Australians are slightly more heavily taxed than New Zealanders.

[the late don knotts]

If our taxes aren't high, why is the government giving some people tax "relief"?

My dictionary says relief is "the alleviation of or deliverance from pain, distress, anxiety, etc".

[Whaleoil]

Yes AJ any Joe Blow can do that with their car payments.

[Aj]

Ok. But only work-related expenses ?

[trogen]

I had a look at the "Taxing Wages 2003/2004"* full report (couldn't access the latest one) and their calculations are quite complicated and include levies, allowances, work-related deductions etc. It isn't just a simplistic look at income tax rates, so some arguments in these comments do not hold up. Naturally one could argue about the accuracy of their calculations (e.g. the extent of inclusion of various deductions that are hard to quantify) but I for one, trust the OECD to try to give a fairly unbiased report. Of course it is only look at income taxes but certain political parties are opposed mainly to NZ's supposedly high income tax. It may be true that the average level of GST is higher than some countries, but that is a large argument in itself and not much has been said about this in the political arena.

* http://lysander.sourceoecd.org/vl=10661199/cl=11/nw=1/rpsv/~6672/v2005n1/s1/p1l

[Aj]

Its either trust the OECD, or trust Labour, or trust ACT, or trust National.

I'd trust the OECD too. Some might think they are in Labour's pocket of course. So must be other 'impartial' economic scrutineers like the World Bank and the Heritage Foundation.

[PaulC]

OK I moved back from California about a year ago - not only are our taxes here lower for the average, they are at the high margins too. On my old salary I was paying the highest marginal rate - 33% fed tax, 10% state and 6% social security (retirement on the first 85k$, really 12% since my employer's required to kick in the same - but lets say 5% on my $100k income) - that makes 33+10+5=48% - add to that 8.5% sales tax on the remaining 52% gives me 48% left for an effective 52% tax rate, here in NZ at my 39% rate I pay 12.5% on the remaining 61% leaving me 54% for an effective 46% tax rate.

So taxes here in NZ 46% for the high marginal rate, California 52% - and in NZ it includes my health care, in the US it doesn't. To be fair there's more scope in the US for avoiding tax (I used to file a 70 page tax form every year) - but I know where I'm better off - NZ not the US - and I get much more for my taxes here in NZ than I ever did in the US

[Mark]

I was watching the Channel Nine morining news programme on the Prime channel this morning and there was a discussion on tax rates in Australia and comparsions in the OECD report.

No mention of NZ - Australia was compared to the Asian Tigers, i.e. Hong Kong and Sinapore and also mentioned was the US, Ireland and the UK.

The main point of the discussion was that taxes are too high in Australia and that they need to move to a lower, flatter tax regime and were tipping changes are going to be made in the up coming Budget.

[M'lud]

In relation to Aussie tax rates, don't forget that as at 1 July this year, the 42% rate kicks in at $AUD 70001, the 47% rate at $AUD 125,001. There are also rumours of more tax cuts in the upcoming budget.

So:

$0 – $6,000 Nil
$6,001 – $21,600 15c $21,601 – $70,000 30c $70,001 – $125,000 42c Over $125,000 47c

[Billy]

Surely the best evidence that tax is too high is that even these monkeys haven't been able to spend it all. They are so convinced of their own cleverness that they think no-one can be trusted with his or her own money.

[SweetDisorder]

Jordon, come out come out whever you are. Waiting to hear your spin on the dumping, then not dumping of Cullen by Clark; a story started and then ended by her. C'mon, HC knows the game, she won't say something just off the cuff, this was for impact, love to know your spin on it.

[tim barclay]

H is getting ready to change Cullen from Finance hence the hints on change. Cullen has been a part time Finance Minister who allowed the recession to happen. H wants a new Finance Minister but who?? Pete Hodgsen is my pick, odd man he is but he would be fairly authordox and would be capable of bringing in some tax cuts which Cullen has all but made impossible while he is finance minister.

[Dean]

Lads, it ought to be obvious by now that Jordan only posts when the heat isn't on. He likes to fire off a few rounds and then take cover. And even then he's not willing to front up and debate the issues. Personal attacks excluded, he's simply not willing to debate. Perhaps he feels he is outclassed or without the ammunition to return fire?

All I know is that I'd love ammunition carriers like AJ. Take a direct hit and he'd love it.

[Aj]

Dean has a wonderfully obscure sense of humour.

[Craig Hall]

Allowing income splitting would, one suspects, be more useful (not to mention easier for the administration), but that doesn't seem likely.

This is still better than nothing, unless we'd rather our population dwindled (not exactly a raison d'etre of the human race...), or immigration was encouraged more (not necessarily a bad thing, but not popular with the electorate).

It's also better than the old system (Family Support) where it was a set amount each week, no matter how much money a family actually earned.

[Craig Hall]

Oops, wrong post!

[SPC]

Mark,

"The OECD did find New Zealand, with a figure around 42 per cent, had the second highest level of personal income tax as a share of total tax revenue among the 30 member countries."

Which only means we get less from indirect taxes and company taxes than some other nations.

It also does not speak to the issue of total tax as a share of GDP.

Tim,

"There is nothing good about the falling dollar and it says the international community has lost faith in NZ"

Actually Tim, economists say the our dollar's floating market value is directly related to "terms of trade".

And all our exporters, companies to farmers, are pleased about the dollar's fall in value.

A high dollar is what places downward pressure on wages (don't people migrate for higher wages) and diminishes domestic spending returns to exporters.

A higher wage New Zealand is dependent on a lower dollar value on a long term basis.

Investment decisions (profitable exporting) are also contingent on this fall in dollar value continuing on a long term basis - if investors feel this is only another cyclical change and another rise in value is ahead, they will not invest (they will not invest).

If we do not fix the dollar to the Oz (dirty float) at about 80 cents, we will see little long term gain.

Our BOP will continue to trend in deficit with upswings peaks to 10% and downswings to 5% of GDP. This will mean we remain a low wage economy that will continue to have it's assets bought up by Ozzies.